Regional approach needed post-Muskrat Falls

Otherwise power reliability issues may persist

During the massive power outages in Newfoundland, the provincial government asserted correctly that the Muskrat Falls project would produce increased electric reliability for the Island. But its reasoning shows a persistence of the concept of the province as an energy island.

Obviously, a new hydro resource is likely to be more reliable as the province’s principal power supply than the aging Holyrood plant.

Holyrood is the province’s largest, single generation resource, which is difficult to replace when it goes out of service. Customers are at risk when a utility is gambling on a resource that cannot easily be backed up.

The Newfoundland blackouts have revealed, as if a reminder were necessary, that it is always the customers who pay for utility problems, whether in the form of outages or higher bills.

So it is sensible to replace Holyrood with a new, more reliable source like Muskrat Falls. While it may be a stretch to believe that the outage was planned as a way of selling skeptical people on the value of Muskrat Falls, it should do just that.

But if connecting Muskrat Falls to the Newfoundland grid were all the project entailed, it would not solve the problem of overreliance on a single, large resource. It would merely be a matter of replacing an old supply with a new one. And that sounds like the current message. In short, the notion of what is technically called an “islanded” utility seems to be surviving into the new era that Muskrat Falls will offer.

As important as the generating station at Muskrat Falls are the high-voltage transmission lines integral to the project. Of course, Labrador will be connected to Newfoundland so power can reach its prime market. But the more important element of the project for ending Newfoundland’s electric vulnerability will be the Maritime Link with Nova Scotia and, through New Brunswick, with the northeastern U.S. grid.

The Maritime Link has been seen mainly as a way of supplying power to Nova Scotia Power in return for Emera, its parent, opening a path for Nalcor to the larger market. But power could flow in both directions on the Maritime Link. For Newfoundland, power could be imported in sufficient quantities to cushion the loss of supply from Muskrat Falls. That can be useful not only when there are unanticipated outages as occurred recently, but also to assist during occasional, planned outages for servicing the hydro turbines.

If used properly, the new interconnection with the Maritimes and its access to backup power supplies should reduce the risk for Newfoundland customers.

Nalcor needs to begin to think in regional terms when Newfoundland is no longer an energy island.

The creation of a system of co-operative management of the high-voltage transmission system to enhance grid reliability throughout Atlantic Canada makes good sense especially for Newfoundland and Labrador because of vulnerability as an isolated system. In fact, the province could be the biggest beneficiary of a regional approach without Nalcor sacrificing any of its market plans.

At a minimum, there should be what is known as a “reliability co-ordinator” for the Atlantic Canada region. In the simplest terms, such an agent makes sure the lights stay on by deploying available generating resources to ensure uninterrupted service to all customers. This operation has nothing to do with creating an electricity market. No province and no utility would be required to sacrifice any market control over its generators or transmission lines. They would cede some authority to the reliability co-ordinator to dispatch power to maintain steady, reliable service when necessary. Individual utilities do that today but Atlantic Canada is a relatively small electric territory, making practical a regional approach. Such a method has long been used among the six New England states.

Nalcor wants to keep a major piece of the Muskrat Falls output for possible future industrial customers in the province. It plans to withhold power from long-term commitments. While waiting, Nalcor would try to sell power in the short-term market that could easily be recalled for in-province use. If Nalcor cannot earn sufficient revenue from such sales, the province’s customers would have to pick up the slack.

Risk for Newfoundland and Labrador electric customers could be reduced, with Nalcor keeping power available for provincial purposes, by using a regional grid to support a power pool. Under that arrangement, the Muskrat Falls output could be used automatically in Atlantic Canada whenever it was available.

In short, if the province adopted a more regional view of the Maritime Link’s potential, the Muskrat Falls project could reduce customer risk even more than is being suggested currently.

Gordon L. Weil is Senior Fellow in Electricity Policy at the Atlantic Institute for Market Studies. A former

Public Advocate and director of the Office of Energy for the State of Maine, he is a licensed energy broker, holds a PhD in public law and government from Columbia University, and lives in Harpswell, Me.